Bankruptcy in Scotland

Free advice from FD Debt Solutions

Are you tired of carrying a constant financial burden and would like a fresh start?

Do you have unmanageable levels of unsecured debt and can’t pay it off over a realistic period of time? Are you unable to manage your monthly credit commitments and find it hard to make ends meet? If you live in Scotland and owe more than £3,000 you might be eligible to apply for Sequestration, otherwise known as bankruptcy. Our team of friendly and experienced insolvency practitioners will help you to assess your final situation, eligibility and will discuss all options available to help you deal with your debt problems. FD Debt Solutions operate from various locations in Scotland including Glasgow, Edinburgh and Hamilton. Our team specialise in insolvency services and can offer you a free and confidential advice on Sequestration and Trust Deed arrangements.

Benefits

Risks

Allows you to make a fresh start

All of your unsecured debts are written off at the end of the process

If you co-operate with your Trustee, adhere to the DCO and don’t have a significant windfall during the period of your sequestration then all interest and charges are written off

Stops creditors from chasing you

Allows you to keep essential possessions

Allows you to pay only what you can afford

Your higher value, non-essential assets will be sold to allow your creditors to be paid

Your credit rating will be affected

It might be more difficult to take out credit in the future

You will have to budget your expenditure going forward

FAQ about Sequestration

Sequestration is a form of insolvency otherwise known as bankruptcy. It can be used to deal with all of your unsecured debts if you are unable to pay your creditors.Sequestration is a formal way to deal with unmanageable levels of debt. An appointed Trustee, will take control of your estate, which includes all of your assets, any equity in your home and all of your unsecured debts. In a lot of cases you will not be required to give up your home or your car, however this depends on your personal circumstances and will be discussed at your free initial interview. The Trustee will also assess whether you can make a payment from surplus income. This is called a Debtor Contribution Order (DCO), if you have the means to contribute to a DCO, you will be required to contribute for a period of 48 months unless your circumstances change. The DCO is assessed using the Common Financial Statement (CFS). The CFS is a statutory tool used to assess your household income and expenditure.

In order to qualify for a bankruptcy in Scotland you have to be resident in Scotland and owe at least £3,000 to your creditors. A further requirement is that you must not have been declared bankrupt in the last 5 years. In order to choose the right debt solution and establish your eligibility for sequestration you have to consult with a Money Advisor who will assess your financial situation. Thereafter, if sequestration is the correct route for you the Money Advisor will be able to help you with completion of the debtor application pack and, if required, issue a Certificate for Sequestration. Is there a fee for sequestration? The debtor application costs £200 to submit and can only be applied for by the person in debt. (If a creditor wants to have a person declared bankrupt they must be owed at least £3,000 and they have to go through a court process) Failure to supply all information required or to deal with requests for further information in time will result in rejection of the application and forfeiture of the fee. As a result you may have to repeat the process again and pay an additional £200. Our team can advise you on various routes into sequestration and help you decide if this option is right for you. In the past, we have noted that people are often not advised of all of the debt solutions available to them. We always explore all options available before recommending sequestration. If you are not sure what options are available to you simply contact our team in Glasgow, Edinburgh, Hamilton, Stirling or Dumbarton for FREE advice.

If you are considering sequestration as an option to deal with your debts you have to consider all of the advantages and disadvantages. Each person’s situation is unique and the benefits depend on all of the circumstances, goals and future plans. The key advantages of sequestration are that you don’t have to deal directly with your creditors and you only pay what you can afford for a fixed period of time. Your Trustee will liaise and deal with your creditors on your behalf and you will stop receiving threatening letters and calls from them. The process of sequestration usually lasts for 12 months as long as you cooperate with your Trustee, however, if you have Debtor Contribution Order you will have to pay a portion of your earnings for a period of 4 years. Overall, voluntary sequestration allows you to only pay what you can afford and gives you a fresh start.

It is never easy dealing with debt, however, it is vital to assess all of the solutions available and choose the right one. Sequestration is often seen as the last resort of debt solutions due to the negative implications it can have on your credit score. However, it is important to remember that if there have been defaults on repayments then your credit score will already be adversely affected and other debt solutions might also affect your financial position and credit ratings. What will happen to your credit ratings after sequestration? Sequestration will impact your ability to obtain credit for big or small purchases for at least six years. You will not be able to obtain any type of loan which can be difficult if you need to get some extra money for your children’s studies or medical emergencies. However, you need to remember that at the end of this process all of your debts will be written off so it is important to assess all of the advantages and disadvantages. Can sequestration affect your job? If you are an entrepreneur or in business you will not be able to take a directorship until you are discharged. Some other jobs in the financial services community might also be affected including solicitors and accountants. What will happen to your assets such as your home or a car once you are sequestrated? The majority of your valuable, non- essential assets will be transferred to your appointed Trustee who will deal with your creditors. However, you will be able to keep most of your essential possessions including household items, various home appliances, children’s toys, clothes and belongings, tools of the trade and items required for studying for example.

If you can’t afford to pay off your existing debts and you are looking for ways to improve your financial situation there are a few options to consider including Debt Management Plans and Debt Arrangement Scheme.The Debt Arrangement Scheme (DAS) is a debt management tool run by the Scottish Government. It allows you to repay your debts through a Debt Payment Programme (DPP). The DPP provides you with protection from your creditors whilst you pay off your debts over a longer period of time. If a DAS is approved it has the effect of freezing all interest, fees and charges on the debts caught by the DAS. If you successfully complete your DAS these will be written off at the end. If a DAS is appropriate for you, you will be referred to a Money Advisor in the charitable sector to take this forward.

If you are considering entering one of the statutory debt solutions described above you may wish to apply for a moratorium on diligence. This will provide you with breathing space for 6 weeks and prevents creditors from taking any action against you whilst you consider the options available. During this 6 week period your creditors cannot serve a charge for payment or enforce any court orders against you.

Normally, the sequestration ends after 12 months when you are considered to be discharged. However, in some instances you might be discharged later. The process is called delayed discharge and usually happens if you don’t cooperate with your trustee. How does it work?From 1 April 2015, the discharge from sequestration is no longer ‘automatic’. However, it can be granted by the Accountant in Bankruptcy at any time after the first anniversary of your sequestration as long as you co-operate with your Trustee. Your Trustee will send a report to the Accountant in Bankruptcy, your creditors and you after 10 months. This report will state whether or not you have co-operated. The Accountant in Bankruptcy then makes a decision whether or not to grant your discharge.Even if you have been discharged you will need to maintain your DCO for the agreed payment amount for a period of 48 months unless your circumstances change. You will also be required to declare any assets of a substantial nature that you acquire for up to 4 years from your date of sequestration, this includes any competition wins, lottery wins or substantial gifts or inheritances.

FD Debt Solutions provide free and confidential insolvency advice for the residents of Scotland. We don’t charge separate set up fees for a Trust Deed or Sequestration arrangements. Your Trustee will receive an administration fee based on your Sequestration repayment plan. The agreed fee will be calculated into your monthly repayment plan and you won’t have to pay anything extra. Our team will guide you through the process until you become debt free. The full fee structure will be explained to you before signing your Sequestration arrangement.

There are currently two options when applying for your own sequestration. The first is the completion of a paper debtor application form with a Money Advisor who may be an Insolvency Practitioner. This is then submitted to the Accountant in Bankruptcy, together with a cheque for the £200 application fee. The Accountant in Bankruptcy will then input it on their system. They then review the documentation submitted and request any further paperwork they require to make a decision on whether a sequestration should be awarded. The Accountant in Bankruptcy will award a sequestration as long as the £200 application fee (£90 in a Minimal Asset Process sequestration where you don’t own land or anything of significant value and aren’t able to pay a contribution in terms of a DCO) cheque clears and they are satisfied with the documentation received.

The second option is that the form can be completed and submitted online. This speeds up the process as it takes out the delay resulting from posting the documents and also eliminates the time it would take the Accountant in Bankruptcy to input the information to the system. Again they will review the paperwork and request any further documentation they need prior to awarding a sequestration. The application fee still needs to be paid prior to the sequestration being awarded, although this can be made online instead of by cheque to save time.The real advantage of an online application over a postal application is the amount of time that is saved between application and sequestration being awarded. We usually therefore advise that the application is submitted online to reduce additional stress and worry suffered as a result of delays and uncertainty.

From 1 April 2015, it became essential for certain individuals who have entered sequestration to receive targeted financial education to improve their awareness of the causes of financial hardship and to enable them to manage their finances better. If, within the first 6 months of your sequestration, your trustee feels that you would benefit from this you will be required to undertake an online modular course. Should you not complete this course it is a matter that your trustee may take into consideration as a matter of non- cooperation and this may effect whether or not you receive your discharge after the first anniversary of your sequestration.

The relevant organisations such as your creditors, banks and professional bodies will be informed about your bankruptcy by the Trustee. That might affect your membership of some professional bodies or ability to withdraw money from your bank account. In addition your telephone, energy and water suppliers will be informed about your insolvency if they are creditors and are owed money. As a result you might be asked to provide some kind of guarantee that you are able to pay for the services supplied. You might be offered or in some circumstances forced to get a pre-payment meter to ensure that your bills are paid on time. Will your friends and family find out about your bankruptcy? The short answer is yes if people want to go looking for this information. The Register of Insolvencies keeps a record of people who enter bankruptcy or a Trust Deed. However, even though it is a public record people really need to search for it in order to find out.

All debt solutions come with advantages and disadvantages; the biggest advantage is getting back in control of your finances and becoming debt free. If you are confused between various debt options and would like to find out more please contact our team of experienced insolvency practitioners in Glasgow, Edinburgh, Hamilton, Stirling and Dumbarton.

If you are looking for a personal insolvency advice or sequestration help in Scotland contact us on 0800 652 0002 or request a call back at the most convenient time for you.

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Sarah Thomson

0800 652 0002

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About FD Debt Solutions

FD Debt solutions are the debt experts of French Duncan Chartered Accountants. Our trusted advisers have been providing debt solutions across Scotland since 1989. Providing a quality service you can trust, we tailor every debt solution to the individual to ensure you can maintain and then exit the specific solution, debt and stress free.